Top accounts to lock in NOW as market crisis means bumper savings rates – here’s how to cash in

MILLIONS of Brits struggling with the cost of living squeeze have been thrown a lifeline as savings rates soar to their best levels in months. While homeowners brace for painful mortgage hikes triggered by turmoil in the Middle East, canny savers can now cash in on a savings boom sparked by the very same market chaos. Oil prices have surged after the outbreak of war in Iran, sending shockwaves through financial markets and pushing up government borrowing costs. British government bond yields hit fresh multi-year highs on Monday, with the 30-year gilt yield touching its highest level since March 1998. Sign up for the Money newsletter Thank you! Experts now fear the Bank of England could be forced into four separate interest rate hikes by next summer, taking the base rate from 3.75% up to 4.75%, as it battles to keep inflation under control. For homeowners, that means yet more pain on mortgage repayments, with fears of a fresh squeeze on household budgets as fuel and energy costs also climb. But there is a silver lining. As the Bank of England raises interest rates to tackle inflation, banks and building societies are also being forced to offer better deals to savers, meaning many people could get a much better return on their money if they act now. Figures from moneyfactscompare.co.uk show savings rates have been steadily climbing all year. Back in January, the best one-year fixed savings deal on the market paid 4.45%, meaning a saver putting away £1,000 would have earned £44.50 in interest over the year, taking their total to £1,044.50. Most read in Money Now, the top rate has jumped to 4.93%, meaning that same £1,000 would earn £49.30 in interest, bringing the total to £1,049.30, an extra £4.80 compared to January’s best deal. The best two-year fix has also improved, rising from 4.16% in January to 5% today. Put away £1,000 for two years at January’s top rate and you would have ended up with £1,084.93. Lock the same £1,000 away today at 5% and you would walk away with £1,102.50, a difference of £17.57. Even easy access accounts, which let you dip into your cash without penalty, are offering competitive returns, with the top deal from cahoot paying 5%. That means £1,000 saved for a year would earn £50 in interest, taking the total to £1,050, all while savers keep the freedom to withdraw their cash whenever they need it. For those willing to lock their money away for longer, Hampshire Trust Bank is offering 5.05% on a five-year bond. Save £1,000 for the full five years and, thanks to compound interest, savers would end up with £1,279.32, a tidy £279.32 profit. Meanwhile, savers who can commit to a regular monthly savings plan could bag as much as 8% with Santander. Someone putting away £100 a month for a year at that rate would deposit £1,200 in total but end up with around £1,244 once interest is added, earning roughly £44 without having to find a lump sum upfront. How to lock in a top rate WITH your current savings rates in mind, don't waste time looking at individual banking sites to compare rates - it'll take you an eternity. Research price comparison websites such as Compare the Market, Go.Compare and MoneySupermarket. These will help you save you time and show you the best rates available. They also let you tailor your searches to an account type that suits you. As a benchmark, you’ll want to consider any account that currently pays more interest than the current level of inflation – 3.4%. It’s always wise to have some money stashed inside an easy-access savings account to ensure you have quick access to cash to deal with any emergencies like a boiler repair, for example. If you’re saving for a long-term goal, then consider locking some of your savings inside a fixed bond, as these usually come with the highest savings rates. Caitlyn Eastell, a personal finance analyst at Moneyfacts, said the rise in rates was a welcome move for households trying to build up a nest egg. She said: “Savers have been handed another welcome boost this month, with fixed savings rates continuing to climb and competition remaining incredibly strong across the market.” She added: “This continued upward movement is positive news for savers who are looking to secure a guaranteed return, particularly those who have been waiting to see if rates could climb even higher.” Eastell also urged people not to assume their existing savings account is still offering the best deal, saying: “It also means that savers who locked away their cash some time ago could now find significantly more competitive options available.” Jazz Gakhal, chief executive of money at Skipton Building Society, said too many people were missing out on better rates simply because they could not be bothered to switch. She said: “For savers, this is a good reminder not to sleep on your savings.” She explained that many customers fall victim to what experts call “money moving paralysis”, where the hassle of switching accounts puts people off checking whether they are getting a good deal. She said: “Many people experience what we call ‘money moving paralysis’ and leave their money where it is because reviewing their options feels like a hassle.” But she insisted it was worth taking the time to look, adding: “But taking a few minutes to check your existing account, particularly if you’ve held it for several years, could make a real difference.” With interest rates on savings accounts at their highest level in months, and further rate rises expected in the coming months, experts are urging households to shop around now rather than risk missing out on the best deals. Anyone with savings sitting in an old account earning little to no interest could be losing out on hundreds of pounds a year in extra cash simply by switching to a better paying deal. Comment now